Equities Gain on Trade Deal Cues, FOMC Meeting Minutes in Focus

Summary: Global equities open for the year on positive note as trade deal optimism drives price momentum. Market bulls are fundamentally supported following comments from US President Donald Trump who stated that Phase 1 of trade deal will be signed by January 15 reinforcing the prevalent positive market mood and risk sentiment in global market from yearend holiday season trading period. Following profit booking on last trading sessions of 2019, major indices and risk assets have scaled back to record highs in Asian and European markets. Further, news that Airbus topples Boeing and takes it place as world’s biggest plane maker also gave the auto industry backed European markets a sharp boost. In forex market, major forex pairs traded positive but gains were capped as USD’s sell off and weakness eased in global market today.

Precious Metals: While news of trade deal optimism still reigned supreme in the global market, precious metals continued to trade positive as investors still retain some caution. While time frame details for trade deal has been announced, investors who are skeptical of the headlines given multiple similar incidents from the past opted to retain their investments in safe haven metals.

Crude Oil: Crude oil futures trading in the international market saw positive price action as trade deal optimism improved the outlook for global economic growth. Further, OPEC’s promised reduction in supply would mean reduced supply when there is an increase in demand pushing price higher. Escalating tensions in Middle East over US air strikes also adds support to crude oil bulls in short term.

AUD/USD: The pair is trading on relatively dovish note today. Softer than expected Chinese manufacturing sector data and easing USD’s weakness weighed down AUD bulls. This caused the pair to fall below 0.7000 handle scaled during yearend trading activity. However, decline was capped well above 0.6980 handle as trade deal optimism continues to underpin AUD bulls.

On The Lookout: Now that a timeframe and venue has been announced for trade deal, traders are looking for headlines to hint at efforts from US and Chinese officials as sign for commitment to get the deal don’t this time as similar scenarios in the past saw trade deal meeting fall apart just before it could be signed. Brexit woes continue to ease past New Year despite pressure from holiday season trade evaporating as BOE’s most recently monthly decision making panel data showed that pessimism in UK business circles have eased in December over recent progress in Brexit proceedings. On release front today, US calendar is set to see release of Initial Jobless Claims, Manufacturing PMI and FOMC Meeting Minutes data in North American market hours.

Trading Perspective: Forex market is seeing major pairs trade with mixed momentum despite prevalent positive investor sentiment and risk appetite as USD’s weakness finally eased following dawn of New Year. However, trade deal optimism influenced by Trump’s comments provides global equities with positive stimulus which helped US futures trading in international market see positive price action. This along with activity in Asian and European stock markets suggests Wall Street is set to see bullish openings with price of major indices and equities set to trade well near record highs in today’s trading session.

EUR/USD: The pair is nursing considerable loss in today’s trading session as forex market is under significant bearish pressure over easing USD’s weakness post New Year. This has caused Euro to lost foot hold at support level of 1.1200 handle but prevalent risk appetite helped keep pair steady above mid-1.11 handle while bulls await data and headlines from US market for yet another chance to scale 1.12 handle.

GBP/USD: Similar to EURO, the British Pound also faced considerable bearish impact as USD saw rebound in global market. While easing Brexit woes come as welcoming change, factors which affect Euro also affects GBP given the fact that UK is still a member of EU. Traders now await fresh updates on Brexit proceedings and data from US markets for chance to recover some of today’s intra-day declines.

USD/CAD: The pair is mostly trading flat but the price action continues to show a slight bias in favor of USD bulls. As USD recovered from recent sell-off post New Year celebrations the pair managed to tease 1.30 handle. But positive crude oil price and trade deal optimism continue to underpin commodity linked currency Canadian Loonie keeping the pair’s gains in check. Traders now await fresh headlines and macro data updates from USA for short term profit opportunities.

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